The Impact of E-Verify on California’s Economy

Some members of Congress have proposed making it mandatory for all employers to use E-Verify—the federal, web-based program through which U.S. businesses can verify the work authorization of new hires. However, mandatory E-Verify without immigration reform is not a solution to the problem of unauthorized immigration. Addressing the reality of a workforce that relies on unauthorized immigrants requires a more comprehensive package of reforms—including a legalization program that brings unauthorized workers out of the shadows, and the creation of sufficient legal visas for the immigrant workers America needs. Mandatory E-Verify alone is likely to harm the economy and U.S. workers.

Mandatory E-Verify without immigration reform will result in lost tax revenue for California.

Households headed by unauthorized immigrants in California paid $2.7 billion[4] in state and local taxes in 2010, according to estimates prepared for the IPC by the Institute for Taxation and Economic Policy.

If E-Verify is made mandatory, unauthorized workers will move into the unregulated, underground economy, where they will be paid under the table. As a result, California will lose $177 million[4] in income tax revenue from these workers.

Unemployment in California will likely INCREASE as a result of mandatory E-Verify.

California’s civilian labor force[5] is 18,064,600 workers, and its unemployment rate is 11.7%.

Surveys of E-Verify[6] have found that between 0.8% and 2.3% of workers received an erroneous response from E-Verify, meaning they had to either correct their records or lose their jobs. Applying these error rates to California, we estimate that between 144,517 and 415,486 U.S. citizens and legal workers in the state would have to correct their records to keep their jobs.

An estimated 0.5% of workers receive an erroneous final non-confirmation. In California, up to 90,323 U.S. citizens and lawful workers would receive an erroneous final non-confirmation and lose their jobs.

Currently, only 24,035 businesses in California are enrolled in E-Verify, which amounts to 3.4% of all California businesses. Mandatory E-Verify would mean a 2,880% increase in the number of businesses using E-Verify in a short time period.

Small businesses would be hardest hit. In California, there are 711,313 small businesses[7], and 99% of all state employers are small businesses.

Bloomberg estimated that E-Verify would cost small business $435 per year. That amounts to more than $312 million per year paid by small businesses in California to use E-Verify.